Question 1

The intrinsic value of a stock is:

Accepted Answer

A)   the current price of the stock.
B)   also known as the justified price of a stock.
C)   calculated using charts.
D)   published in the Value Line Investment Survey on a regular basis.E) B) and D)
F) None of the above

Question 2

Aside from ROE being calculated as Net income/Shareholders' equity, it can be expressed as a product of:

Accepted Answer

A)   ROA and book value per share.
B)   ROA and leverage.
C)   ROA and profit margin.
D)   leverage and book value per share.E) A) and B)
F) A) and C)

Question 3

ROE measures the amount of net income available to bondholders.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following identities calculates EPS?:

Accepted Answer

A)   ROA X Total Assets/Shareholders' Equity
B)   book value per share X Total Assets/Shareholders' Equity.
C)   ROE X book value per share
D)   ROA X book value per share.E) None of the above
F) B) and D)

Question 5

The PEG ratio takes into account not only the P/E ratio of the stock but adjusts it for the effect of:

Accepted Answer

A)   the Government influence on the economy.
B)   changes in the GDP.
C)   how stocks are affected by changes in GAAP.
D)   Growth in the company's earnings.E) A) and B)
F) C) and D)

Question 6

If a firm's ROA and ROE are equal, it can be concluded that the firm is:

Accepted Answer

A)   exhibiting constant growth year over year.
B)   in need of capital and should issue more stock.
C)   without debt in its capital structure.
D)   too highly levered.E) None of the above
F) A) and D)

Question 7

Find the P/E ratio of a stock with a ROE of 30 per cent, a book value per share of $5.00, and a current stock price of $30.

Accepted Answer

P/E = ROE(Book value...

Question 8

The primary factor why P/E ratios vary among companies is:

Accepted Answer

A)   P/E ratios vary over time.
B)   P/E ratios vary with economic conditions.
C)   investor expectations about the future growth in earnings.
D)   P/E ratios are an unstable, random figure.E) B) and D)
F) None of the above

Question 9

Which of the following statements regarding retained earnings is not true?

Accepted Answer

A)   It is part of shareholders' equity.
B)   Along with cash it represents spendable funds for a company.
C)   It is previous earnings that have not been paid out as dividends.
D)   All of these statements are true.E) B) and D)
F) B) and C)

Question 10

The higher the amount of debt financing, the higher the ROE, other things being equal.

Accepted Answer

A) True 
 B)False

Question 11

In order to calculate the intrinsic value of the stock analysts often use the normalized EPS for a company under typical operating conditions which:

Accepted Answer

A)   does not make any adjustments to earnings since all earnings are normal.
B)   adjusts earnings by deducting out the normal component and discounts the rest.
C)   allows the analyst discretion to determine what is normal and what is not.
D)   adjusts for unusual impacts on earnings such as non-recurring or extraordinary earnings..E) A) and C)
F) All of the above

Question 12

Investors interested in buying stocks which report bad news and suffer a sharp decline should buy now before they rebound.

Accepted Answer

A) True 
 B)False

Question 13

According to the dividend valuation model, stock prices decrease when the:

Accepted Answer

A)   expected dividend increases.
B)   required rate of return increases.
C)   dividend growth rate increases.
D)   required rate of return decreases.E) A) and B)
F) A) and C)

Question 14

The less sales per dollar of assets, the less efficient the firm.

Accepted Answer

A) True 
 B)False

Question 15

Time series analysis assumes the future will be similar to the past.

Accepted Answer

A) True 
 B)False

Question 16

Other things being equal,

Accepted Answer

A)   the higher the expected growth rate, the lower the P/E ratio.
B)   as the risk-free rate increases, the required rate declines.
C)   as the required rate of return increases, the P/E ratio declines.
D)   as the equity risk premium increases, the required rate of return will declines.E) C) and D)
F) B) and D)

Question 17

In the model P/E = (D1 / E1) / (k - g), the P/E should increase if the dividend payout rate increases, other things being the same. If the payout rate was intentionally increased by the board of directors, other things are likely not to stay the same. What is likely to happen to the dividend growth rate and the required return?

Accepted Answer

If more earnings are paid out, then ther...

Question 18

The key item on the balance sheet for investors is the after-tax net income.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not shown on the balance sheet on book value basis?

Accepted Answer

A)   land
B)   shareholders' equity
C)   marketable securities
D)   property and equipmentE) C) and D)
F) A) and D)

Question 20

The belief that the intrinsic value of a stock is influenced by the performance of the company that issued the stock is called:

Accepted Answer

A)   technical analysis.
B)   industry analysis.
C)   fundamental analysis.
D)   economic analysis.E) A) and B)
F) B) and C)

Exam 17: Company Analysis

Investors interested in buying stocks which report bad news and suffer a sharp decline should buy now before they rebound.

Correct Answer
verified

The less sales per dollar of assets, the less efficient the firm.

Correct Answer
verified

The intrinsic value of a stock is:

Correct Answer
verified

The key item on the balance sheet for investors is the after-tax net income.

Correct Answer
verified

Time series analysis assumes the future will be similar to the past.

Correct Answer
verified

The PEG ratio takes into account not only the P/E ratio of the stock but adjusts it for the effect of:

Correct Answer
verified

Which of the following is not shown on the balance sheet on book value basis?

Correct Answer
verified

Correct Answer
verified
If more earnings are paid out, then ther...
View Answer

According to the dividend valuation model, stock prices decrease when the:

Correct Answer
verified

Find the P/E ratio of a stock with a ROE of 30 per cent, a book value per share of $5.00, and a current stock price of $30.

Correct Answer
verified
P/E = ROE(Book value...
View Answer

In order to calculate the intrinsic value of the stock analysts often use the normalized EPS for a company under typical operating conditions which:

Correct Answer
verified

ROE measures the amount of net income available to bondholders.

Correct Answer
verified

The belief that the intrinsic value of a stock is influenced by the performance of the company that issued the stock is called:

Correct Answer
verified

The higher the amount of debt financing, the higher the ROE, other things being equal.

Correct Answer
verified

Aside from ROE being calculated as Net income/Shareholders' equity, it can be expressed as a product of:

Correct Answer
verified

Other things being equal,

Correct Answer
verified

The primary factor why P/E ratios vary among companies is:

Correct Answer
verified

If a firm's ROA and ROE are equal, it can be concluded that the firm is:

Correct Answer
verified

Which of the following identities calculates EPS?:

Correct Answer
verified

Which of the following statements regarding retained earnings is not true?

Correct Answer
verified

Exam 17: Company Analysis

Investors interested in buying stocks which report bad news and suffer a sharp decline should buy now before they rebound.

Correct AnswerverifiedShow Answer

The less sales per dollar of assets, the less efficient the firm.

Correct AnswerverifiedShow Answer

The intrinsic value of a stock is:

Correct AnswerverifiedShow Answer

The key item on the balance sheet for investors is the after-tax net income.

Correct AnswerverifiedShow Answer

Time series analysis assumes the future will be similar to the past.

Correct AnswerverifiedShow Answer

The PEG ratio takes into account not only the P/E ratio of the stock but adjusts it for the effect of:

Correct AnswerverifiedShow Answer

Which of the following is not shown on the balance sheet on book value basis?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf more earnings are paid out, then ther...View AnswerShow Answer

According to the dividend valuation model, stock prices decrease when the:

Correct AnswerverifiedShow Answer

Find the P/E ratio of a stock with a ROE of 30 per cent, a book value per share of $5.00, and a current stock price of $30.

Correct AnswerverifiedP/E = ROE(Book value...View AnswerShow Answer

In order to calculate the intrinsic value of the stock analysts often use the normalized EPS for a company under typical operating conditions which:

Correct AnswerverifiedShow Answer

ROE measures the amount of net income available to bondholders.

Correct AnswerverifiedShow Answer

The belief that the intrinsic value of a stock is influenced by the performance of the company that issued the stock is called:

Correct AnswerverifiedShow Answer

The higher the amount of debt financing, the higher the ROE, other things being equal.

Correct AnswerverifiedShow Answer

Aside from ROE being calculated as Net income/Shareholders' equity, it can be expressed as a product of:

Correct AnswerverifiedShow Answer

Other things being equal,

Correct AnswerverifiedShow Answer

The primary factor why P/E ratios vary among companies is:

Correct AnswerverifiedShow Answer

If a firm's ROA and ROE are equal, it can be concluded that the firm is:

Correct AnswerverifiedShow Answer

Which of the following identities calculates EPS?:

Correct AnswerverifiedShow Answer

Which of the following statements regarding retained earnings is not true?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If more earnings are paid out, then ther...
View Answer

Correct Answer
verified

Correct Answer
verified
P/E = ROE(Book value...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified